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What Is a Junior ISA?

What Is a Junior ISA?

What Is a Junior ISA?

As your family grows and you look to save money, you may hear more and more about junior ISAs. These accounts are fantastic for helping to set up a financial safety net for your kids – or your grandchildren, or nieces and nephews. 

As with all ISAs, there are specific rules to setting up and running junior accounts that you’ll need to remember before you start putting money aside for your little ones. How do junior ISAs actually work – and are they really worth your time and interest? Let’s take a look. 

How a Junior ISA Works

Junior Individual Savings Accounts, or junior ISAs, are tax-free savings accounts set up specifically for children. They are long-term accounts that can be set up for any child from a very young age.  

A parent or guardian must organise and set up this type of account, and they can pick a cash or stocks and shares approach. If you desire, your child can benefit from both kinds of accounts at once, as long as you only pay into one of either type. General ISA rules apply – you can’t pay into more than one cash savings account in a single tax year! 

Other loved ones may also pay into these accounts to participate in your child’s savings – however, only you as a parent or guardian can create it, and only your child (as named on the account) can access the account.  

What’s more, your child won’t be able to draw any money until they come of age. No one can take money from the account or make transfers until your child passes 18 years old and takes control of the account themselves.  

It’s a fairly simple setup and a great way to put aside a stock of money to grow for the years to come. It might be a nice way to help your kids put a deposit down on a house or pay for their first car, for example! 

two happy kids checking their junior ISA funds online

Who Is Eligible for a Junior ISA?

Generally speaking, any child resident in the UK can have a junior ISA account.  

To qualify, they need to be under the age of 18, although some junior ISA providers set the age limit lower than this – it’s worth checking with providers you’re interested in. 

Some providers also insist that your child is not eligible for a Child Trust Fund account to set up a junior ISA. If you do have a trust fund for your child, but want a junior ISA instead, then you will have to transfer the money from one to the other. Again, your chosen provider can help you navigate this. 

Children living outside of the UK can apply for junior ISAs if they have a parent or guardian who is registered as a Crown servant (i.e., working in the UK’s armed forces, overseas civil service, or diplomatic service), and the child is entirely under that parent or guardian’s care.  

Otherwise, your child can start benefiting from tax-free savings as soon as possible – all you have to do is start paying in! 

What Is the Current Limit on Junior ISAs in the UK?

As with all ISAs, limits on what you can pay into a junior account may change from year to year. For example, the savings limit for junior ISAs for a given year may be £9,000. This means that you can only pay up to £9,000 into your junior ISA for any and/or each child during the given tax year (between April and April). 

If you have two types of junior ISA account for a single child, you will have to split this limit between the two. You can split them any way you choose, but you cannot put more than £9,000 into savings or stocks total. 

When Will My Child Be Able to Access Their Junior ISA?

As mentioned, the general rule is that kids can take over their savings when they reach 18 years of age. However, depending on the junior ISA provider that you choose, your child may be able to take control over the account from you from the age of 16.  

The general idea behind junior ISAs is to let your child build up money before they can legally start earning for themselves. Therefore, it’s worth looking at lower age thresholds if you want to give them an early kickstart. If you’d rather make that money travel further, stick to the standard 18-year limits. 

a mother researching junior ISAs

Are Junior ISAs Worth It?

Junior ISAs can offer a fantastic opportunity for your child to benefit from a stock of money when they first leave school or head to university. Given that junior ISAs are tax-free savings accounts, they are indeed very efficient. This means that once your child can finally access the account at 18, they won’t have to pay income or capital gains tax deductions on the money they have in the account. It will be all theirs to use as they wish! 

Above all else, a junior ISA account is a superb way of ensuring a gift to your child when they turn 18 and can greatly help them whatever their future plans may be. The earlier you set up the account for them, the more likely you are to save a substantial sum, too – consider looking at interest rates and finding a competitive setup. 

One of the most contentious issues with this kind of account is that no one can touch the money but your child when they turn 18. This ensures that whatever is saved in it is entirely for them.  

However, this also means that should you make a payment into it, you cannot retrieve it should you need it in future. Therefore, it is best to ensure that you will not need the money you put into the account in the near future!  

If you’re interested in looking into junior ISAs, be sure to research the market carefully – and, wherever possible, speak to a financial advisor who can break things down further for you. 

As touched on above, once you’ve deposited those funds into your kids ISA you won’t be able to access that cash. If you’ve done this and need some money fast, LoanBird will be able to find you a loan instantly.

You can apply now with us in under a few minutes with no guarantor needed. We’ll just need to know a bit about yourself, your income & expenditure and what your loan is for. You’ll then be redirected through to our lending portal to view your loan options.

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